ITT shares in freefall as student-loan losses mount

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ITT Educational Services Inc. set aside an extra $60 million in the fourth quarter to cover losses in a disastrous student loan program, and the payment helped send the Carmel-based operator of career-focused colleges tumbling to a loss of $11.6 million, or 49 cents per share, the company reported Thursday morning.

Wall Street analysts expected a profit of $1.09 per share, according to a survey by Thomson Reuters.

The disappointing news sent ITT's already-swooning stock down another 15 percent Thursday morning. The stock has lost about 30 percent of its value over the past five days.

The problems are in a $420 million block of private loans extended to students in 2009 and 2010. Because credit was hard to obtain in 2009, ITT agreed to cover a chunk of the lenders’ losses on the loans.

At the time, the deal kept money flowing to students, so they could cover the cost of enrolling in ITT courses. But in the midst of a terrible job market, students have been defaulting on those loans at unprecedented rates—more than 60 percent.

And it’s now coming back to bite ITT.

A year ago, ITT was in a similar situation, reporting a fourth-quarter loss of $9.5 million, or 41 cents per share, because it was forced to set aside $66.1 million to cover losses from the 2009-'10 loan portfolio.

At the time, CEO Kevin Modany painted the $66 million reserve as a high-end estimate of ITT’s loan exposure.

But ITT says it received new data on student defaults in the fourth quarter, and employed an enhanced methodology for calculating default rates. That led ITT to set aside another $60.3 million to cover loan losses.

All told, the company has set aside $127 million to cover losses on the 2009-'10 loan portfolio.

Other than the extra payment to cover loan losses, ITT’s quarter went as planned. Revenue was $262.9 million—about $2 million higher than analysts expected—but a decrease of 12.6 percent from the same quarter the previous year.

Enrollment of new students increased 4.5 percent, to 13,995, from a year earlier.

Total student enrollment at year's end, however, fell 5.8 percent, to 57,542, from the end of 2012.

ITT expects 2014 profit of $3 to $3.65 per share. Analysts expect $3.11 per share, on average.

It’s been a bad week for ITT. The company’s shares fell nearly 6 percent Wednesday after it disclosed that 12 state attorneys general and the U.S. Consumer Financial Protection Bureau are probing its recruitment practices, along with other for-profit colleges.

ITT shares were down $5.67 Thursday morning, to $31.51 per share.


  • Scam I Am
    This will eventually turn into another financial fiasco for the Government. The so called 'Beauty Tech" schools are the same scam. My daughter went to one where the teachers would leave and let uncertified students teach, make up grades on tests and so on. Now she's stuck with a massive student loan and nothing to show for it. Most of these little 'meatball' schools just give naïve kids the hope of a bright future while saddling them with a debt their so called trade can't repay. No sympathy for the devil here.
  • Serves them right
    They are in this position not because of the job market but because of their sub standard education. A couple of their degrees can land you good jobs but at $84,000 for a bachelors degree that is only nationally accredited it is hardly a good deal compared to a state funded, regionally accredited school. In fact in their graphic arts and game design degrees I have not personally met anyone who got a job in field. The valedictorian of the program where I went to school even had to teach himself a whole new career because he had leaders in the game design industry tell him he wasted his time and money and no one will take the degree seriously.
  • Harrison College
    Harrison College has the same type of lending practice. So that's a For-Profit College to watch in the future for these same trends. Beware of for profit institutional loan programs that have a rate of %15.9. Sub-prime lending is at it's finest.
  • Haha
    Serves them right. Unfortunately they should have spent the energy trying to asses why college costs so much, rather than finding a way to "help" students afford it.

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  1. PJ - Mall operators like Simon, and most developers/ land owners, establish individual legal entities for each property to avoid having a problem location sink the ship, or simply structure the note to exclude anything but the property acting as collateral. Usually both. The big banks that lend are big boys that know the risks and aren't mad at Simon for forking over the deed and walking away.

  2. Do any of the East side residence think that Macy, JC Penny's and the other national tenants would have letft the mall if they were making money?? I have read several post about how Simon neglected the property but it sounds like the Eastsiders stopped shopping at the mall even when it was full with all of the national retailers that you want to come back to the mall. I used to work at the Dick's at Washington Square and I know for a fact it's the worst performing Dick's in the Indianapolis market. You better start shopping there before it closes also.

  3. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  4. If you only knew....

  5. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.